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Can we accept donations before we receive our IRS tax-exempt status?
Question: We have a donor who would like to make a large donation to the nonprofit before the end of the year, but our 501(c)(3) status is still pending. Can we accept the donation?
Good news – you can accept a donation even before your public charity status is official!
You do need to disclaim to the donor that your IRS exemption application is still pending. Assuming that you applied for your 501(c)(3) status within 27 months of incorporating the organization, the IRS will backdate your tax-exempt status to the date of your incorporation. That means all donations you accepted while your application was pending would be retroactively deductible. You may also tell the donor you have no reason to believe the application will be rejected and offer to provide the donor a copy of your IRS approval letter as soon as you receive it.
Basically, you cannot hold yourself out as a 501(c)(3) public charity while your application is pending.
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